Correlation Between Tsingtao Brewery and PennyMac Financial

Can any of the company-specific risk be diversified away by investing in both Tsingtao Brewery and PennyMac Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tsingtao Brewery and PennyMac Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tsingtao Brewery and PennyMac Financial Services, you can compare the effects of market volatilities on Tsingtao Brewery and PennyMac Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tsingtao Brewery with a short position of PennyMac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tsingtao Brewery and PennyMac Financial.

Diversification Opportunities for Tsingtao Brewery and PennyMac Financial

0.03

Correlation Coefficient

Tsingtao Brewery  PennyMac Financial

Significant diversification

The 3 months correlation between Tsingtao and PennyMac is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and PennyMac Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Financial and Tsingtao Brewery is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tsingtao Brewery are associated (or correlated) with PennyMac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Financial has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and PennyMac Financial go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and PennyMac Financial

Assuming the 90 days trading horizon Tsingtao Brewery is expected to under-perform the PennyMac Financial. But the stock apears to be less risky and, when comparing its historical volatility, Tsingtao Brewery is 2.01 times less risky than PennyMac Financial. The stock trades about -0.03 of its potential returns per unit of risk. The PennyMac Financial Services is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,650  in PennyMac Financial Services on October 23, 2024 and sell it today you would earn a total of  650.00  from holding PennyMac Financial Services or generate 6.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tsingtao Brewery  vs.  PennyMac Financial Services

Tsingtao Brewery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Tsingtao Brewery is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

PennyMac Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PennyMac Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and PennyMac Financial

The main advantage of trading using opposite Tsingtao Brewery and PennyMac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsingtao Brewery position performs unexpectedly, PennyMac Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PennyMac Financial will offset losses from the drop in PennyMac Financial's long position.

The idea behind Tsingtao Brewery and PennyMac Financial Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.